Chairman Xi, Winnie the Pooh, and China’s Rapidly Changing Economy

The Chinese Communist Party’s (CCP) recent reforms are creating uncertainty in the world’s second largest economy. For the last two decades, the CCP stuck to politics and left business to businesses. This hands-off approach led to the rise of China’s multi-billion-dollar giants like Alibaba and Didi. In big tech, the CCP nurtured the growth of its national champions, like Weibo and Baidu, by blocking foreign competitors—specifically, Facebook and Google. For tech firms, it was the Wild West within an authoritarian system. But recent reforms under Chairman Xi Jinping show the CCP abandoning its old approach and meddling in business. Xi appears to have ushered in what many are calling the end of China’s “Gilded Age” and a bringing of big business to heel.

The CCP’s recent reforms stem from concerns about national debt, inequality, and desire for greater state control. This month, for instance, China unveiled its Personal Information Protection (PIP) law. The CCP claims that the PIP law is meant to protect the personal data of Chinese citizens. While Europe instituted its own data protection laws in 2018, China’s reaches much farther—placing particular emphasis on data that flows beyond China’s borders. Like many of China’s laws, it is as opaque as it is far-reaching. While targeting foreign firms, the law appears to still allow China to collect information on its own citizens. That creates uncertainty for foreign firms and investors who rely on the collection of consumer data. It is also a reminder to foreign companies that, in China, they may never compete on a level playing field.

Consolidating state power is nothing new under Chairman Xi.  Over the past decade, his anti-corruption purges led to the arrest or political exile of hundreds of his political rivals. In recent years, however, Xi has extended his purges to Chinese film stars, business leaders, and even the sagely cartoon bear Winnie the Pooh. More recently, Alibaba’s owner, Jack Ma, was set to become China’s richest billionaire, but he mysteriously disappeared for several months. Before Ma’s disappearance, his company, Ant Group, was ready to launch the world’s largest IPO. However, the CCP blocked the IPO, eliminating $76 billion from Ant’s value. That shock rippled through global markets and left business leaders, Chinese and foreign, scratching their heads.

The CCP’s crackdown on big tech has had a chilling effect on the industry. Since February, investors have erased more than $1 trillion from the market value of China’s largest listed tech firms. Most Chinese companies now host Communist Party cells, which have authority to dictate decision-making. China’s Cyberspace Regulator has taken stake in TikTok’s parent company ByteDance, and the social media firm, Weibo. Why has the CCP instituted such drastic reforms?

The Party line is that it has a genuine interest in encouraging companies to focus on “common prosperity.”That aligns with the CCP’s long-term goal of closing the wealth gap between China’s billionaires and its poor majority. However, another explanation is hard to ignore. Chairman Xi has taken great pains to maximize his authority and to extend his tenure beyond traditionally appropriate term limits. Perhaps the recent reforms have less to do with China than they do with Xi’s insecurity amongst rivals and distaste for sharing power. That may, at least, help to explain Xi’s aversion to Winnie the Pooh.